Good luck. Not too hard but you just need to keep things in order.
The Hoffman Card Co. earned £1.50 per share last year. Investment in fixed capital was £0.80 per share, and depreciation was £0.30. Investment in working capital was £0.20 per share.
Hoffman expects earnings to grow at 15% per year for the next five years and that investment in fixed capital, depreciation, andinvestment in working capitalwill grow at the same rate. After five years, the growth in earnings and working capital requirements will decline to a stable 5% per year, and investment in fixed capital and depreciationwill offset each other (i.e., they will be equal). Hoffman’s target debt ratio is 30%.
The shareholders require a return of 17% on their investment during the high-growth stage and a return of 10% on their investment during the stable stage.
The FCFE in Year 6 and the value per share of Hoffman’s common stock areclosest to: